By Sir Ronald Sanders
There is a school of thought in China that the country’s relations with Latin America and the Caribbean should be on a “holistic and integrated co-operation platform”. In other words, China should treat with the “Caribbean” and “Latin America” as one. This would be a mistake for China, and an unwelcome development for the small Caribbean countries whose interest would be subsumed by those of the larger Latin American states.
Sir Ronald Sanders is a Consultant and Senior Research Fellow at London University. Reponses to:
The advocates in China of a holistic and integrated relationship between China and Latin America and the Caribbean as a whole specifically want “an inter-governmental” platform in a wide range of areas “such as political, business, resources and energy, infrastructure, cultural, scientific and technological, think-tanks, youth and non-governmental areas”. They would like an early meeting of China-Latin America and the Caribbean Ministers, followed by a Summit. They also argue that “China is a big country in the Asia-Pacific” and that “more and more Latin American and Caribbean countries have increasingly ‘looked to the Asia-Pacific’, hence co-operation in Asia-Pacific affairs has gradually become a new platform for China-Latin America and Caribbean co-operation”.
But, it is Latin American countries with a Pacific side for which ‘looking to Asia-Pacific’ holds an important interest. Caribbean countries lie on the Atlantic side, and the development of a more intense relationship between China and Latin American countries on Pacific links bears little relevance or benefits for the Caribbean.
The advocates in China of a holistic and integrated co-operation platform with Latin America and the Caribbean miss the point that “Latin American” and “Caribbean” countries are themselves not integrated. After centuries of separation by their colonisers, Latin American and Caribbean countries are now at a very early stage of efforts to overcome their lack of integration including poor transportation and other communication connections as well as language barriers for commerce. Further, the differences in the size of their populations, the magnitude of their economies, and the amount of their natural resources place Latin American and Caribbean countries at significantly dissimilar points in economic and other co-operation efforts with China. Any attempt, therefore, to treat “Latin American” and “Caribbean” countries as one would disadvantage smaller Caribbean states.
From China’s point of view, while the Caribbean’s natural resources and its small markets (despite China’s balance of trade surplus) may be of little significance to its well-being, in a global system made up of states the voting power of the Caribbean in the United Nations and other organisations is of value on matters of importance to China. Further, small though Caribbean resources and markets may be to the Chinese economy, they still represent revenues and employment for China.
For instance, in the year 2012 alone, China enjoyed a balance of trade surplus with the 15 CARICOM countries of US$3 billion. CARICOM countries exports to China were worth US$366 million while China’s exports to CARICOM countries were valued at US$3.4 billion. There is not a single independent CARICOM country with which China does not have a favourable balance of trade surplus. Among the CARICOM countries with the biggest balance of trade deficits with China in 2012 were: Jamaica, US$755.4 million; The Bahamas US$475.2 million; Guyana, US$ 173.4 million; and Trinidad and Tobago, US$172.5 million. (Source: China’s reports on Imports and Exports).
Given that, in 2012 alone, China had a balance of trade surplus with the 15 CARICOM countries of US$3 billion, China’s pledge last June to provide US$3 billion to the entire Caribbean was equivalent to its last year’s trade surplus alone, and China will earn that sum annually if the current trade pattern continues. Additionally, since the pledged sum of US$3 billion represents loans (albeit on concessional terms) that have to be repaid, China will also get that money back plus interest – altogether very good business for China.
In this context, while the Caribbean market may be small in relation to China’s global economic activity, it would appear that Caribbean countries do have some significance and bargaining power if they act together.
It is also noteworthy that CARICOM countries’ exports to China represent a small portion of their total exports. Therefore, as a market for their goods, China is not significant for CARICOM countries; the region’s exports to the US, the European Union and Canada are much more beneficial. Further, China will remain insignificant as an export market until CARICOM producers and manufacturers begin collectively to explore seriously ways of jointly producing for and penetrating the market. But, at the same time, imports from China by CARICOM countries will grow and so will China’s balance of trade surplus.
In this connection, Caribbean countries must tackle their relations with China as a distinct sub-region and not as part of a Latin America and Caribbean collective. Caribbean countries relations with China ought not to be subsumed in the wider China-Latin America and Caribbean relationship with an emphasis on Asia-Pacific.
China’s lending to “Latin American” countries on the one hand and to “Caribbean” countries on the other tells its own story. Over the seven-year period 2005 to 2012, China made concessionary loans of over US$87 billion to Latin American and Caribbean countries. But, Latin American countries received the lion’s share of the money – US$83.4 billion of which Venezuela, US$44.5 billion; Brazil, US$12.1billion; and Argentina, US$11.8 billion were the principal beneficiaries. The Caribbean shared only US$4 billion of which The Bahamas received more than half at US$2.8 billion while Jamaica got US$662 million and Guyana US$130 million (source: Inter-American Dialogue). The sums for other Caribbean countries were smaller.
There is no doubt that Caribbean countries need to penetrate the Chinese market to offset the huge balance of payments surplus in China’s favour. The private sector acting collectively throughout the region has to get its act together. But, at the same time Governments have to engage the Chinese government to convert a significant portion of China’s huge balance of trade surplus with the region into official development assistance – aid for trade – and a large portion of that should be allocated to tooling the Caribbean’s private sector to sell goods and services in China, and to facilitating investment by Chinese companies in large scale projects in tourism, renewable energy, maritime transportation, agriculture and fisheries.
There are influences in China that favour dealing with the special circumstances of the Caribbean. It is up to the governments of the region to engage the Chinese government with well thought-out and bankable proposals.